Read a newspaper or turn on a TV these days, and you can’t avoid the alarming statistics of the number of people in the United States without health insurance—nor can you avoid hearing about the many plans and proposals currently being presented in hopes of reforming the American health care system. Harold “Hal” Luft, Ph.D., a nationally renowned health economist and director of PAMF’s Research Institute, answers questions about how our nation got to this point and what we need to do to overcome the barriers to affordable, quality health care for all.

Q: How did we arrive at the health care system we currently have?

A: Our current health care system has evolved largely by accident. Until the 1930s, health insurance did not exist. During the Great Depression, hospitals formed Blue Cross plans to allow patients to put aside money each pay period so that when they needed care, there was money to pay for it. The hospitals supported this because it helped ensure they would get paid. Then, medical associations started the Blue Shield plans to assure that doctors would be paid.

At the end of World War II, wage and price controls were in place. Employers were competing with each other to find workers, but they weren’t allowed to raise wages. They discovered that offering health benefits to their employees would not count as a wage increase. This is how we ended up with employer-sponsored health coverage. Then in the 1970s, a law passed allowing large employers to avoid state regulation of pension benefits and to self-insure their own health plans. This resulted in widely varying coverage and benefits, yielding inconsistent and confusing incentives for physicians and hospitals. All of these events were circumstantial accidents that created a patchwork arrangement; they were not intended to create an organized health care system.

I remember looking at my uncle’s hospital bill for a heart attack he had in the 1950s. His phone charges were about one-third of the cost of his hospital room and board charge. Care wasn’t very expensive, since there wasn’t much doctors could do for people back then. Over time, we’ve learned how to do many, many more procedures. We also have health insurance that pays for these new procedures and the technology that makes them possible (which, in turn, makes it more attractive for companies to develop new technologies). This has allowed us to dramatically improve care, but it costs money. These costs, of course, are passed on to patients.

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Q: If our current health care system is an accidental patchwork, why haven’t we reformed it? Why has it been so difficult to change our current system?

A: The structure of the United States government was intentionally designed to make it difficult to affect change, which is why it’s been challenging for us to have health reform to this point. These “accidental” systems are hard to undo, especially considering that lobbyists and others who make money off of the current system walk the halls of Congress to convince legislators to maintain the status quo.

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Q: The Obama administration is proposing an overhaul of the U.S. health care system. This isn't the first time proposals have been introduced. How are things different now?

A: When the Clinton administration led the charge to reform health care in the 1990s, the argument was we ought to do it because it was “the right thing to do.” Most of the middle class, however, had some type of health insurance and was not feeling threatened. This is not the case now. Many people are losing their jobs (and thus, their employer-sponsored health insurance) because of the financial crisis on Wall Street, and even workers with access to health insurance can’t afford
the premiums!

In the 1990s, the baby boomers were further away from retirement—and from relying on Medicare—than they are today. Now, they realize that the sustainability of Medicare might be threatened if there’s not a change in the system. Consumers are not the only ones who are unhappy with rising costs of medical care and insurance; primary care doctors are also very displeased with the existing structure and are advocating change.

We now have a Democratic president and a dominant Democratic majority in Congress, so the political consensus needed to affect change is in place. The Obama administration, learning from the failures of the Clinton administration, is involving interest groups, such as health insurers and health care providers, in the discussion to ensure the major players in the health care industry support the efforts and can work with Congress to achieve real solutions. The politics are very different today. All of these factors are acting in concert like never before.
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Q: What is the difference between universal health care coverage and a single-payer system?

A: Universal coverage simply implies that all Americans have coverage, whereas a singlepayer system means this coverage is offered by a single source (such as states or the federal government). You can have universal health coverage without having a single-payer system. You can also have a single-payer system that doesn’t cover everyone—for example, people who are in the country illegally.

Here are some examples of how both of these models might work. In the classic single-payer model, a single entity (i.e. the federal government) would enroll everyone and would finance and operate the system. Like Medicare, private contractors would still be used to administer payment and provide care to patients, but the government would set the fees and make the rules.

Under a universal coverage/multi-payer model, the government would raise taxes to pay for vouchers, allowing people to choose their own coverage, or mandate that everyone needs to have health care coverage (just like we mandate that anyone who drives a car must have auto
insurance). You would choose the coverage that you want (similar to an employer covering all employees but offering a menu of options for
where they get their care), and some of the more expensive coverage options may require additional personal payments. The government would subsidize those who didn’t have employer-sponsored health coverage and couldn’t afford to purchase coverage.

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Q: What’s the best solution?

A:I believe we ought to ensure that everyone has coverage, and this is relatively easy to do—it just requires money. The more complicated and interesting question is, how do we change the way the health care delivery system works to ensure people get high quality care at a lower cost? Right now, the United States spends more on health care than any other industrialized national (16 percent of U.S. Gross Domestic Product), yet we rank at the bottom for outcomes and satisfaction. Why? It’s the way our delivery system operates. Our current delivery system pays health care providers separately for the little things—a pill here, a screening exam or procedure there. We need to coordinate medical services and educate patients.

The core of my health care reform proposal involves bundling payments so that clinicians work together with patients to treat them as appropriately as possible. This includes paying doctors, nurses and other health care providers for spending time talking to patients, something that currently doesn’t happen. Physician need to work more as coaches, and we need the reimbursement systems in place to make this possible. This will also increase patient satisfaction.

The Robert Wood Johnson Foundation recently awarded PAMF’s Research Institute a grant that will enable Dr. Luft to disseminate his ideas further. To learn more about Dr. Luft’s health care reform proposal, called SecureChoice, visit pamf.org/research, and read the latest news about his proposal and his book, Total Cure: The Antidote to the Health Care Crisis.

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